Report No. 276

3) Wagering Agreements

4.38 Those who argue in favour of betting and gambling being regulated contend that under Section 30 of the Indian Contract Act, 187288 a wager is void and unenforceable, but at the same time it is not forbidden by law and hence, cannot be termed illegal89. The section provides that wagering agreements are void. In the case of Carlill v. Carbolic Smoke Ball Co.90, a wagering agreement was defined as:

one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum of stake he will so win or lose, there being no other real consideration for the making of such a contract by either of the parties.

4.39 The object behind this provision is to deter people from indulging in games of chance to make a quick buck. Instead, they could devote their time and efforts on endeavors that are more productive for themselves, their families as well as the society91.

4.40 Section 30 of the Indian Contract Act in its current form is detrimental to the players and consumers of the Gaming Industry. A legal casino or online gaming operator could refuse to pay the winnings citing the provisions of Section 30 and unenforceability of the gambling transaction to its favour. Further, the section does not distinguish between wagers on games of chance versus wagers on games of skill.

4.41 This section can be equated with Section 18 of the Gambling Act, 184592 of the United Kingdom. Thus, when posed with the question of enforceability of contracts relating to gambling and betting activities, the United Kingdom dealt with the issue by enacting the Gambling Act, 2005 (hereinafter UK Gambling Act). The UK Gambling Act repealed certain provisions of a number of statutes, dating back to the eighteenth and nineteenth centuries, which prevented contracts relating to gambling from being enforceable. The UK Gambling Act by way of Section 334 repealed Section 18 of the Gambling Act, 1845, which read as:

18. Wagers not recoverable at Law.- All contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void; and no suit shall be brought or maintained in any court of law and equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made:

Provided always, that this enactment shall not be deemed to apply to any subscription or contribution, or agreement to subscribe or contribute, for or towards any plate, prize, or sum of money to be awarded to the winner or winners of any lawful game, sport, pastime, or exercise.

4.42 Section 334 of the UK Gambling Act, 2005 did not give retrospective effect to the repealing. Furthermore, Section 335 thereof provides that the fact that a contract relates to gambling shall not affect negatively to its enforcement. However, it does not, override any other provisions of law that prevents enforcement on the ground of unlawfulness that means any ground for a void contract applicable to any other kind of contract.

4.43 Section 336 of the 2005 Act, further allows the Gaming Commission to declare void certain bets (even when made through a licensed operator) on grounds of unfairness, and all contracts or arrangements in relation to such bets.

4.44 It is most important to note that even though, Section 30 of the Indian Contract Act and Section 18 of the Gambling Act of 1845 (UK) prevented the enforcement of agreements relating to gambling or betting, it has not prevented parties from entering into such agreements.